UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Quarterly Period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission File Number: 000-19580
 T-3 ENERGY SERVICES, INC.
  Delaware
(State or Other Jurisdiction 
of Incorporation or Organization)
    
    76-0697390
(IRS Employer
Identification No.)7135 Ardmore, Houston, Texas
(Address of Principal Executive Offices)
    
    77054
(Zip Code)
 (713) 996-4110
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
  o þ




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TABLE OF CONTENTS
 FORM 10-Q
 Item
    
    PagePART I1. Financial StatementsCondensed Consolidated Balance Sheets as of March 31, 2010 and
December 31, 2009
    
    
    1Condensed Consolidated Statements of Operations for the Three Months
Ended March 31, 2010 and 2009
    
    
    2Condensed Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2010 and 2009
    
    
    3Condensed Consolidated Statements of Comprehensive Income for the Three
Months Ended March 31, 2010 and 2009
    
    
    4Notes to Condensed Consolidated Financial Statements
    
    
    52. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    
    123. Quantitative and Qualitative Disclosures About Market Risk
    
    
    184. Controls and Procedures
    
    
    19PART II5. Other Information
    
    
    206. Exhibits
    
    
    20
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T-3 ENERGY SERVICES, INC.
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
 (in thousands except for share amounts)
 March 31,
    
    
    December 31,2010
    
    
    2009(unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    6,646
    
    
    $
    11,747Accounts receivable  trade, net
    
    
    32,615
    
    
    
    28,450Inventories
    
    
    57,574
    
    
    
    53,689Deferred income taxes
    
    
    3,026
    
    
    
    2,485Prepaids and other current assets
    
    
    5,582
    
    
    
    7,311Total current assets
    
    
    105,443
    
    
    
    103,682Property and equipment, net
    
    
    48,793
    
    
    
    49,353Goodwill, net
    
    
    88,954
    
    
    
    88,779Other intangible assets, net
    
    
    31,514
    
    
    
    32,091Other assets
    
    
    5,994
    
    
    
    5,916Total assets
    
    $
    280,698
    
    
    $
    279,821LIABILITIES AND STOCKHOLDERS EQUITYCurrent liabilities:Accounts payable  trade
    
    $
    17,017
    
    
    $
    17,213Accrued expenses and other
    
    
    11,443
    
    
    
    14,359Current maturities of long-term debt
    
    
    
    
    
    
    Total current liabilities
    
    
    28,460
    
    
    
    31,572Long-term debt, less current maturities
    
    
    
    
    
    
    Other long-term liabilities
    
    
    926
    
    
    
    1,144Deferred income taxes
    
    
    8,345
    
    
    
    8,009Commitments and contingenciesStockholders equity:Preferred stock, $.001 par value, 25,000,000 shares authorized,
no shares issued or outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 50,000,000 shares authorized,
13,061,644 and 13,038,143 shares issued and outstanding at
March 31, 2010 and December 31, 2009
    
    
    13
    
    
    
    13Warrants, 10,157 issued and outstanding at March 31, 2010 and
December 31, 2009
    
    
    20
    
    
    
    20Additional paid-in capital
    
    
    182,629
    
    
    
    181,115Retained earnings
    
    
    58,181
    
    
    
    56,201Accumulated other comprehensive income
    
    
    2,124
    
    
    
    1,747Total stockholders equity
    
    
    242,967
    
    
    
    239,096Total liabilities and stockholders equity
    
    $
    280,698
    
    
    $
    279,821
  1




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T-3 ENERGY SERVICES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
 (in thousands except per share amounts)
 Three Months EndedMarch 31,2010
    
    
    2009Revenues:Products
    
    $
    36,632
    
    
    $
    53,341Services
    
    
    8,370
    
    
    
    9,44545,002
    
    
    
    62,786Cost of revenues:Products
    
    
    24,130
    
    
    
    33,181Services
    
    
    5,207
    
    
    
    5,57929,337
    
    
    
    38,760Gross profit
    
    
    15,665
    
    
    
    24,026Selling, general and administrative expenses
    
    
    12,957
    
    
    
    18,078Equity in earnings of unconsolidated affiliates
    
    
    106
    
    
    
    194Income from operations
    
    
    2,814
    
    
    
    6,142Interest expense
    
    
    (167
    )
    
    
    (250
    )Other income, net
    
    
    62
    
    
    
    25Income from
operations before provision for income taxes
    
    
    2,709
    
    
    
    5,917Provision for income taxes
    
    
    729
    
    
    
    2,097Net income
    
    $
    1,980
    
    
    $
    3,820Earnings per common share:Basic
    
    $
    .15
    
    
    $
    .30Diluted
    
    $
    .15
    
    
    $
    .30Weighted average common shares outstanding:Basic
    
    
    12,915
    
    
    
    12,529Diluted
    
    
    13,093
    
    
    
    12,605
  2




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T-3 ENERGY SERVICES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
 (in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009Cash flows from operating activities:Net income
    
    $
    1,980
    
    
    $
    3,820Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Bad debt expense
    
    
    109
    
    
    
    284Depreciation and amortization
    
    
    2,223
    
    
    
    2,036Amortization of deferred loan costs
    
    
    57
    
    
    
    57Gain on sale of assets
    
    
    (9
    )
    
    
    (6
    )Write-off of property and equipment and inventory, net
    
    
    162
    
    
    
    13Deferred taxes
    
    
    (348
    )
    
    
    (723
    )Employee stock-based compensation expense
    
    
    1,109
    
    
    
    2,019Excess tax benefits from stock-based compensation
    
    
    (28
    )
    
    
    Equity in earnings of unconsolidated affiliate
    
    
    (106
    )
    
    
    (194
    )Changes in assets and liabilities, net of effect of
acquisitions and dispositions:Accounts receivable  trade
    
    
    (4,229
    )
    
    
    2,802Inventories
    
    
    (4,046
    )
    
    
    (1,355
    )Prepaids and other current assets
    
    
    1,734
    
    
    
    322Other assets
    
    
    (43
    )
    
    
    (124
    )Accounts payable  trade
    
    
    (282
    )
    
    
    (6,614
    )Accrued expenses and other
    
    
    (3,120
    )
    
    
    2,095Net cash provided by (used in) operating activities
    
    
    (4,837
    )
    
    
    4,432Cash flows from investing activities:Purchases of property and equipment
    
    
    (1,018
    )
    
    
    (1,546
    )Proceeds from sales of property and equipment
    
    
    82
    
    
    
    6Cash paid for acquisitions, net of cash acquired
    
    
    
    
    
    
    (7,474
    )Net cash used in investing activities
    
    
    (936
    )
    
    
    (9,014
    )Cash flows from financing activities:Net borrowings under swing line credit facility
    
    
    
    
    
    
    1,114Borrowings on revolving credit facility
    
    
    
    
    
    
    17,000Repayments on revolving credit facility
    
    
    
    
    
    
    (13,000
    )Proceeds from exercise of stock options
    
    
    520
    
    
    
    Excess tax benefits from stock-based compensation
    
    
    28
    
    
    
    Net cash provided by financing activities
    
    
    548
    
    
    
    5,114Effect of exchange rate changes on cash and cash equivalents
    
    
    124
    
    
    
    (18
    )Net increase (decrease) in cash and cash equivalents
    
    
    (5,101
    )
    
    
    514Cash and cash equivalents, beginning of period
    
    
    11,747
    
    
    
    838Cash and cash equivalents, end of period
    
    $
    6,646
    
    
    $
    1,352
  3




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T-3 ENERGY SERVICES, INC.
 
 CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
 (in thousands)
 Three Months EndedMarch 31,2010
    
    
    2009Net income
    
    $
    1,980
    
    
    $
    3,820Other comprehensive income (loss):Foreign currency translation adjustment, net of
tax
    
    
    377
    
    
    
    (349
    )Comprehensive income
    
    $
    2,357
    
    
    $
    3,471
  4




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T-3
ENERGY SERVICES, INC.
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
 1. BASIS OF PRESENTATION
  Fair Value of Financial Instruments
  Goodwill and Other Long-Lived Assets
   New Accounting Pronouncements
    5




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2. BUSINESS COMBINATIONS AND DISPOSITIONS
 Business Combinations
     Fair value of tangible and intangible assets,
net of cash acquired
    
    $
    8,865Goodwill recorded
    
    
    Total liabilities assumed
    
    
    (1,391
    )Common stock issued
    
    
    Cash paid for acquisitions, net of cash acquired
    
    $
    7,474
 6




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3. INVENTORIES
  March 31,
    
    
    December 31,2010
    
    
    2009Raw materials
    
    $
    5,370
    
    
    $
    5,304Work in process
    
    
    12,693
    
    
    
    11,891Finished goods and component parts
    
    
    39,511
    
    
    
    36,494$
    57,574
    
    
    $
    53,689
 4. DEBT
   5. EARNINGS PER SHARE
  7




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Three Months EndedMarch 31,2010
    
    
    2009Numerator:Net income
    
    $
    1,980
    
    
    $
    3,820Denominator:Weighted average common shares outstanding  basic
    
    
    12,915
    
    
    
    12,529Shares for dilutive stock options, restricted stock and warrants
    
    
    178
    
    
    
    76Weighted average common shares outstanding  diluted
    
    
    13,093
    
    
    
    12,605Basic earnings per common share
    
    $
    .15
    
    
    $
    .30Diluted earnings per common share
    
    $
    .15
    
    
    $
    .30
  6. SEGMENT INFORMATION
    (dollars in thousands)PressureThree months ended March 31:
    
    Control
    
    
    Corporate
    
    
    Consolidated2010Revenues
    
    $
    45,002
    
    
    $
    
    
    
    $
    45,002Depreciation and amortization
    
    
    1,987
    
    
    
    236
    
    
    
    2,223Income (loss) from operations
    
    
    6,661
    
    
    
    (3,847
    )
    
    
    2,814Capital expenditures
    
    
    903
    
    
    
    115
    
    
    
    1,0182009Revenues
    
    $
    62,786
    
    
    $
    
    
    
    $
    62,786Depreciation and amortization
    
    
    1,827
    
    
    
    209
    
    
    
    2,036Income (loss) from operations
    
    
    15,045
    
    
    
    (8,903
    )
    
    
    6,142Capital expenditures
    
    
    1,338
    
    
    
    208
    
    
    
    1,546
 7. COMMITMENTS AND CONTINGENCIES
   8




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Chevron, U.S.A. v. Aker Maritime, Inc
  8. STOCKHOLDERS EQUITY
 Common Stock
  Warrants
  Additional Paid-In Capital
  9. STOCK-BASED COMPENSATION
  9




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Stock Option Awards
    Restricted Stock Awards
    10. INCOME TAXES
 The Companys effective tax rate was 26.9% for the three months ended March 31, 2010 compared
to 35.4% for the three months ended March 31, 2009. The tax rate in 2010 was lower than the statutory rate
as well as the rate in 2009
 10




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11. OTHER
 Subsequent Events
   11




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ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 General
   Outlook
   12




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Results of Operations
 Three Months ended March 31, 2010 Compared with Three Months ended March 31, 2009
 Revenues.
 Gross Profit.
 Selling, General and Administrative Expenses.
 Equity in Earnings of Unconsolidated Affiliates.
 Interest Expense.
 13




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Income Taxes.
 Net Income.
 Liquidity and Capital Resources
  Net Cash Provided by (Used in) Operating Activities.
 Net Cash Used in Investing Activities.
 Net Cash Provided by Financing Activities.
 Principal Debt Instruments.
  14




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Off-Balance Sheet Arrangements.
 Critical Accounting Policies and Estimates
    15




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New Accounting Pronouncements
     Cautionary Note Regarding Forward-Looking Statements
  16




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17




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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
       18




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ITEM 4. CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Controls Over Financial Reporting
  19




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Item 5. Other Information
 Employment Agreement with James M. Mitchell
 Agreement)
  
    
    the Agreement does not provide for target percentages for Mr. Mitchells annual
incentive award, instead leaving any such award up to the discretion of the Compensation
Committee of our Board of Directors;
    
    Mr. Mitchell will no longer receive an automobile allowance or reimbursement of country club
dues;
    
    Mr. Mitchell is no longer eligible for an additional severance payment upon his death or
disability;
    
    Mr. Mitchells severance payment for a termination not for cause will be equal to (i)
the greater of his annual salary or the remaining salary payable to him under the Agreement
plus (ii) the greater of his target or prior year actual annual incentive bonus;
    
    Mr. Mitchell is now eligible for a payment following a termination not for cause or
resignation with good reason following a change of control equal to (i) two times his
annual base salary plus (ii) the greater of his target or prior year actual annual incentive bonus,
and his unvested stock options and restricted stock will vest automatically (except for
performance-based restricted stock, which shall only vest upon completion of the
performance goals).
  
 PART II
 
 Item 6. Exhibits
 Exhibit Number
    
    
    
    Identification of Exhibit3.1
    
    
    
    Certificate of Incorporation of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 31,
2001).3.2
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2005).3.3
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2006).3.4
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2007).3.5
    
    
    
    Amended and Restated Bylaws of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 11,
2007).4.1
    
    
    
    Specimen Certificate of Common Stock, $.001 par value, of
the Company (incorporated herein by reference to Exhibit
4.1 to the Companys 2001 Annual Report on Form 10-K).10.1*+
    
    
    
    Employment Agreement by and betwen James M. Mitchell and T-3 Energy Services, Inc.31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.32.1**
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Executive Officer).32.2**
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Financial Officer).
 
 *
    
    Filed herewith.**
    
    Furnished herewith.+
    
    Management contract or compensatory plan of arrangement. 20




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SIGNATURES
  T-3 ENERGY SERVICES, INC.By:
    /s/ JAMES M. MITCHELLJames M. Mitchell
 (Chief Financial
   Officer and Senior Vice President) 21




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INDEX TO EXHIBITS
 Exhibit Number
    
    
    
    Identification of Exhibit3.1
    
    
    
    Certificate of Incorporation of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 31,
2001).3.2
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.2 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2005).3.3
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2006).3.4
    
    
    
    Certificate of Amendment to the Certificate of
Incorporation of T-3 Energy Services, Inc. (incorporated
herein by reference to Exhibit 3.1 to the Companys
Quarterly Report on Form 10-Q for the period ended June
30, 2007).3.5
    
    
    
    Amended and Restated Bylaws of T-3 Energy Services, Inc.
(incorporated herein by reference to Exhibit 3.1 to the
Companys Current Report on Form 8-K dated December 11,
2007).4.1
    
    
    
    Specimen Certificate of Common Stock, $.001 par value, of
the Company (incorporated herein by reference to Exhibit
4.1 to the Companys 2001 Annual Report on Form 10-K).10.1*+
    
    
    
    Employment Agreement by and betwen James M. Mitchell and T-3 Energy Services, Inc.31.1*
    
    
    
    Certification of Chief Executive Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.31.2*
    
    
    
    Certification of Chief Financial Officer pursuant to Rule
13a-14(a) or Rule 15d-14(a), promulgated under the
Securities Exchange Act of 1934, as amended.32.1**
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Executive Officer).32.2**
    
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As
Adopted Pursuant To Section 906 Of The Sarbanes-Oxley Act
Of 2002 (Chief Financial Officer).
 
 *
    
    Filed herewith.**
    
    Furnished herewith.+
    
    Management contract or compensatory plan of arrangement. 22